We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Onto Innovation vs. PDF Solutions: Which Chip Stock is the Better Buy?
Read MoreHide Full Article
Key Takeaways
Onto Innovation posted record Q2 revenue of $343.1 million, up 35.3% year over year.
ONTO raised its 2026 advanced-packaging growth outlook to at least 80%, driven by AI and HBM demand.
PDF Solutions grew Q2 revenue 19% to $61.5 million, with backlog rising 16% year over year to $271 million.
The semiconductor industry is benefiting from rising demand for AI, HPC, advanced packaging and increasingly complex chips. However, investors looking to capitalize on these trends have several options beyond chip manufacturers themselves. Companies that provide semiconductor inspection equipment, manufacturing analytics and yield-optimization software can also benefit from rising chip production and technological complexity. Two companies worth comparing are Onto Innovation, Inc. (ONTO - Free Report) and PDF Solutions (PDFS - Free Report) .
Onto Innovation is emerging as a beneficiary of advanced-node manufacturing and AI-driven advanced packaging. PDF Solutions offers software, data analytics and engineering solutions designed to improve chip manufacturing yields and operational performance.
Per a report from Fortune Business Insights, the global semiconductor market is projected to grow from $659.66 billion in 2026 to $1,477.06 billion by 2034, representing a CAGR of 10.6%. Both stocks help semiconductor manufacturers improve production efficiency, but their business models, growth opportunities and investment risks differ significantly. Their overlapping markets and complementary technologies make them a compelling stock comparison for investors evaluating semiconductor industry growth.
The Case for ONTO Stock
The company’s investment appeal is fueled by the growth of AI and HPC, which is driving demand for increasingly sophisticated semiconductor manufacturing and quality-control processes. Advanced packaging technologies, including 2.5D integration and HBM, are increasing the need for precise inspection and process control. Moreover, the transition to smaller, more complex semiconductor nodes is making defect detection, measurement accuracy and manufacturing yields increasingly critical.
Onto Innovation delivered record second-quarter revenue of $343.1 million, up 35.3% year over year. Advanced Nodes revenue increased 50% sequentially, while Specialty Devices and Advanced Packaging revenue reached records. It reported a backlog exceeding $1 billion for the first time. Driven by robust demand and strong execution, ONTO raised its second-half 2026 revenue, margin and EPS outlook. Building on a strong first half, it expects second-half revenue to grow more than 25%, with third-quarter revenue of $380–$400 million and further growth in the fourth quarter. At the midpoint, revenue guidance implies another sequential increase of roughly 14%, suggesting strong demand.
Image Source: Zacks Investment Research
ONTO’s Dragonfly platform is emerging as a key growth driver as AI-related HBM and 2.5D packaging increase demand for advanced inspection and metrology. Inspection revenue rose 30% sequentially in the second quarter, while Dragonfly G5 expands applications through higher resolution and sensitivity. It received more than $200 million in Dragonfly orders from a single OSAT, with most deliveries scheduled for 2027, alongside an HBM volume purchase agreement through 2027. Panel-level packaging is also gaining traction, with revenue expected to more than double in 2026 and grow again in 2027. Reflecting broader demand, management raised its 2026 advanced-packaging growth outlook to at least 80%, up from more than 50% previously, and expects further growth in 2027 without signs of customer overcapacity.
Nonetheless, Onto Innovation faces several risks, including tariff and cost pressures, customer concentration and competitive challenges. Changing trade policies, export restrictions and rising material, fuel and freight costs could offset margin gains and increase exposure to changes in customer spending and payment delays. Significant revenue from Taiwan and South Korea also creates regional risks.
In addition, sustained R&D spending, rising operating expenses and acquisition integration could pressure profitability. Semilab USA’s operating losses highlight the challenge of translating portfolio expansion into earnings growth, while competition requires continued investment in product development and customer qualifications.
The Case for PDFS Stock
PDF Solutions is seeing stronger commercial momentum, highlighted by eight-figure SecureWISE and DirectScan bookings, record Cimetrix bookings and progress toward its annual eProbe placement target. The company reaffirmed its 20% revenue growth outlook for 2026, with expanding SecureWISE adoption and a stronger pipeline supporting its prospects. In September, PDF Solutions introduced Exensio Aurora, a highly scalable analytics architecture designed to process semiconductor manufacturing data at petabyte scale and enable secure deployment of agentic AI across manufacturing operations and supply chains.
PDF Solutions reported second-quarter revenue of $61.5 million, up 19% year over year, while first-half revenue increased 22%, supporting its 20% growth target for 2026. Bookings included multiple eight-figure SecureWISE and DirectScan contracts, alongside several seven-figure deals. Backlog rose 10% sequentially and 16% year over year to $271 million. SecureWISE won a record eight-figure contract, while DirectScan added three machine placements. Customer engagement also strengthened across memory, mature-node and other semiconductor applications, supported by growing AI-related demand.
However, higher capital expenditures are expected in the second half as the company invests in additional systems. Management remains focused on margin recovery, customer expansion and converting bookings into revenue. The company's ability to secure additional customers, expand existing deployments and convert contracted work into recognized revenue will determine whether its momentum continues.
Image Source: Zacks Investment Research
Furthermore, PDF Solutions is much smaller than Onto Innovation, which can create both opportunities and risks. Customer concentration, implementation schedules and changes in semiconductor spending can affect quarterly results. Rising hardware, personnel, R&D and equipment costs could pressure margins, while continued investment in DirectScan systems is expected to keep capital expenditures elevated. Changing export controls and FX fluctuations could also affect international operations. Recurring revenue accounted for 80% of second-quarter sales, down from 89% a year earlier, potentially making revenue less predictable as the mix shifts toward upfront sales.
Share Price Movement for ONTO & PDFS
Over the past year, ONTO stock has surged 81.4% while PDFS is up 53.1%.
Image Source: Zacks Investment Research
Valuation: Which Stock Offers Better Value?
In terms of forward price/earnings, ONTO shares are trading at 22.06X, lower than PDFS’ 38.8X.
Image Source: Zacks Investment Research
Both companies trade at premium valuations. Onto Innovation's growth profile may justify a premium multiple if AI infrastructure spending, HBM demand and advanced packaging investment remain strong. However, investors should compare its forward P/E ratio and EV to EBITDA with expected earnings growth before buying. PDFS’ smaller revenue base and software-oriented business model may support long-term expansion, but investors must consider its earnings consistency, share dilution and the price already assigned to future growth.
How the Zacks Consensus Estimate Compares for ONTO & PDFS
Earnings estimates for ONTO have moved up for both 2026 and 2027 over the past 60 days.
Image Source: Zacks Investment Research
For PDFS, there have been no estimate revisions for the current year.
Image Source: Zacks Investment Research
ONTO or PDFS: Which Stock Offers Greater Upside?
Onto Innovation currently has the stronger case for investors seeking exposure to AI-related semiconductor equipment demand and demonstrated earnings growth. PDF Solutions could appeal to investors looking for a smaller company with recurring software-related opportunities and potentially substantial operating leverage. Valuation and execution, however, will determine which delivers better shareholder returns.
ONTO, at present, carries a Zacks Rank #2 (Buy) while PDFS has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank and valuations, ONTO seems the preferred choice for investors prioritizing near-term growth momentum and exposure to advanced semiconductor manufacturing. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
View the Zacks #1 Rank List
Image: Bigstock
Onto Innovation vs. PDF Solutions: Which Chip Stock is the Better Buy?
Key Takeaways
The semiconductor industry is benefiting from rising demand for AI, HPC, advanced packaging and increasingly complex chips. However, investors looking to capitalize on these trends have several options beyond chip manufacturers themselves. Companies that provide semiconductor inspection equipment, manufacturing analytics and yield-optimization software can also benefit from rising chip production and technological complexity. Two companies worth comparing are Onto Innovation, Inc. (ONTO - Free Report) and PDF Solutions (PDFS - Free Report) .
Onto Innovation is emerging as a beneficiary of advanced-node manufacturing and AI-driven advanced packaging. PDF Solutions offers software, data analytics and engineering solutions designed to improve chip manufacturing yields and operational performance.
Per a report from Fortune Business Insights, the global semiconductor market is projected to grow from $659.66 billion in 2026 to $1,477.06 billion by 2034, representing a CAGR of 10.6%. Both stocks help semiconductor manufacturers improve production efficiency, but their business models, growth opportunities and investment risks differ significantly. Their overlapping markets and complementary technologies make them a compelling stock comparison for investors evaluating semiconductor industry growth.
The Case for ONTO Stock
The company’s investment appeal is fueled by the growth of AI and HPC, which is driving demand for increasingly sophisticated semiconductor manufacturing and quality-control processes. Advanced packaging technologies, including 2.5D integration and HBM, are increasing the need for precise inspection and process control. Moreover, the transition to smaller, more complex semiconductor nodes is making defect detection, measurement accuracy and manufacturing yields increasingly critical.
Onto Innovation delivered record second-quarter revenue of $343.1 million, up 35.3% year over year. Advanced Nodes revenue increased 50% sequentially, while Specialty Devices and Advanced Packaging revenue reached records. It reported a backlog exceeding $1 billion for the first time. Driven by robust demand and strong execution, ONTO raised its second-half 2026 revenue, margin and EPS outlook. Building on a strong first half, it expects second-half revenue to grow more than 25%, with third-quarter revenue of $380–$400 million and further growth in the fourth quarter. At the midpoint, revenue guidance implies another sequential increase of roughly 14%, suggesting strong demand.
Image Source: Zacks Investment Research
ONTO’s Dragonfly platform is emerging as a key growth driver as AI-related HBM and 2.5D packaging increase demand for advanced inspection and metrology. Inspection revenue rose 30% sequentially in the second quarter, while Dragonfly G5 expands applications through higher resolution and sensitivity. It received more than $200 million in Dragonfly orders from a single OSAT, with most deliveries scheduled for 2027, alongside an HBM volume purchase agreement through 2027. Panel-level packaging is also gaining traction, with revenue expected to more than double in 2026 and grow again in 2027. Reflecting broader demand, management raised its 2026 advanced-packaging growth outlook to at least 80%, up from more than 50% previously, and expects further growth in 2027 without signs of customer overcapacity.
Nonetheless, Onto Innovation faces several risks, including tariff and cost pressures, customer concentration and competitive challenges. Changing trade policies, export restrictions and rising material, fuel and freight costs could offset margin gains and increase exposure to changes in customer spending and payment delays. Significant revenue from Taiwan and South Korea also creates regional risks.
In addition, sustained R&D spending, rising operating expenses and acquisition integration could pressure profitability. Semilab USA’s operating losses highlight the challenge of translating portfolio expansion into earnings growth, while competition requires continued investment in product development and customer qualifications.
The Case for PDFS Stock
PDF Solutions is seeing stronger commercial momentum, highlighted by eight-figure SecureWISE and DirectScan bookings, record Cimetrix bookings and progress toward its annual eProbe placement target. The company reaffirmed its 20% revenue growth outlook for 2026, with expanding SecureWISE adoption and a stronger pipeline supporting its prospects. In September, PDF Solutions introduced Exensio Aurora, a highly scalable analytics architecture designed to process semiconductor manufacturing data at petabyte scale and enable secure deployment of agentic AI across manufacturing operations and supply chains.
PDF Solutions reported second-quarter revenue of $61.5 million, up 19% year over year, while first-half revenue increased 22%, supporting its 20% growth target for 2026. Bookings included multiple eight-figure SecureWISE and DirectScan contracts, alongside several seven-figure deals. Backlog rose 10% sequentially and 16% year over year to $271 million. SecureWISE won a record eight-figure contract, while DirectScan added three machine placements. Customer engagement also strengthened across memory, mature-node and other semiconductor applications, supported by growing AI-related demand.
However, higher capital expenditures are expected in the second half as the company invests in additional systems. Management remains focused on margin recovery, customer expansion and converting bookings into revenue. The company's ability to secure additional customers, expand existing deployments and convert contracted work into recognized revenue will determine whether its momentum continues.
Image Source: Zacks Investment Research
Furthermore, PDF Solutions is much smaller than Onto Innovation, which can create both opportunities and risks. Customer concentration, implementation schedules and changes in semiconductor spending can affect quarterly results. Rising hardware, personnel, R&D and equipment costs could pressure margins, while continued investment in DirectScan systems is expected to keep capital expenditures elevated. Changing export controls and FX fluctuations could also affect international operations. Recurring revenue accounted for 80% of second-quarter sales, down from 89% a year earlier, potentially making revenue less predictable as the mix shifts toward upfront sales.
Share Price Movement for ONTO & PDFS
Over the past year, ONTO stock has surged 81.4% while PDFS is up 53.1%.
Image Source: Zacks Investment Research
Valuation: Which Stock Offers Better Value?
In terms of forward price/earnings, ONTO shares are trading at 22.06X, lower than PDFS’ 38.8X.
Image Source: Zacks Investment Research
Both companies trade at premium valuations. Onto Innovation's growth profile may justify a premium multiple if AI infrastructure spending, HBM demand and advanced packaging investment remain strong. However, investors should compare its forward P/E ratio and EV to EBITDA with expected earnings growth before buying. PDFS’ smaller revenue base and software-oriented business model may support long-term expansion, but investors must consider its earnings consistency, share dilution and the price already assigned to future growth.
How the Zacks Consensus Estimate Compares for ONTO & PDFS
Earnings estimates for ONTO have moved up for both 2026 and 2027 over the past 60 days.
Image Source: Zacks Investment Research
For PDFS, there have been no estimate revisions for the current year.
Image Source: Zacks Investment Research
ONTO or PDFS: Which Stock Offers Greater Upside?
Onto Innovation currently has the stronger case for investors seeking exposure to AI-related semiconductor equipment demand and demonstrated earnings growth. PDF Solutions could appeal to investors looking for a smaller company with recurring software-related opportunities and potentially substantial operating leverage. Valuation and execution, however, will determine which delivers better shareholder returns.
ONTO, at present, carries a Zacks Rank #2 (Buy) while PDFS has a Zacks Rank #3 (Hold). Consequently, in terms of Zacks Rank and valuations, ONTO seems the preferred choice for investors prioritizing near-term growth momentum and exposure to advanced semiconductor manufacturing. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.